Why These 10 Entrepreneurs Welcome The Recently Passed GST Bill !

Goods and Services Tax (GST) is a major indirect tax reform in India which takes Value Added Tax (VAT) to its logical conclusion. GST would avoid burden of multiple taxation (tax on tax) with a cascading effect.

Though GST is a tax reform, it is going to impact every sphere of business activity, be it procurement, supply chain, IT, logistics, pricing, margins, working capital (literally every sector) as a number of business decisions taken based on the current tax structure may no longer be relevant in the new GST regime.

The introduction of GST (finally) is a significant step in the reform of indirect taxation in India. Combining several Central and State taxes into a single tax would lessen down the flow or double taxation, facilitating a common national market. The simplicity of the tax should lead to easier administration and enforcement. From the consumer point of view, the biggest advantage would be in terms of a reduction in the overall tax burden on goods, which is currently estimated at 25%-30%.

“Since the markets have already priced in GST and its effects, a favorable outcome might not trigger a strong movement. Secondly, it is possible that the GST outcome when it comes to the implications of the capital markets in the short term may not come in a positive manner as it was expected. So, we may expect selling pressure in the market.” said Raghu Kumar of RKSV

According to Raghu,

Sectors with positive impact with GST Implementation

FMCG: Implementation of GST will bring in a lot of positives for the FMCG sector as the effective tax rate will be reduced by 200-500 basis points. This augurs well for companies like Hindustan Unilever, Emami, Godrej etc.

Logistics: ‘One nation One tax’ has been a long pending wish of the logistics industry. The GST bill once implemented will eliminate a lot of inter-state taxes. This would bring a positive impact on companies like Container Corp of India, Adani SEZ etc.

Consumer Durable: A positive for the Logistics will have rolling effect on the Consumer Durable industry. These companies will be hugely benefited by the reduced logistical spending. You would see a positive trend for companies like Voltas, Havells etc.

Cement: Overall tax burden on this sector should decline. The sector would also benefit from the reduced logistics cost. You would see a positive trend for companies like Ambuja, ACC and others.

But what about from an entrepreneur’s point of view? TechStory interacted with these 10 entrepreneurs to understand their view points on the GST Bill.

Kunal Bahl, Co-Founder & CEO at Snapdeal

“We welcome the passage of the GST Bill, which will lead the way for India to be one unified market. Digital commerce has already dismantled the geographical barriers in the country by enabling buyers and sellers from across India to discover and transact with each other. The GST regime, by breaking inter-state tax barriers, will enable seamless flow of goods and services across the counts. The draft GST Model law provides for “tax collection at source” on payments to vendors selling on online market place. This will lead to working capital issues for small vendors and needs to be re-examined.

This letter and spirit of the GST reforms needs to be reflected in its implementation so that the current maze of compliance requirements is not unwittingly replaced with another set of fresh hurdles. A robust IT backbone and well-developed supporting infrastructure is crucial to successful implementation of GST.”

Jason Kothari, CEO, Housing.com

“The GST Bill, which was passed in the Rajya Sabha and is being touted as India’s biggest tax reform, has been a long-standing request of the real estate sector that has been plagued by multiple layers of taxation. While the immediate benefits of the GST are expected to go to segments like logistics and warehousing, and retail – residential real estate, in the long term, should benefit from an unified tax regime, a lesser tax burden on construction materials like cement, steel, etc.

This, in turn, can lead to lower construction costs for developers, who can pass on the price benefit to home buyers. The tangible benefits for the home buyer will also depend on the final rate of GST. If the rate is higher than the taxes being paid currently, it could increase the cost of an under-construction flat. However, the GST’s impact on creating a transparent taxation system and boosting business sentiments is very positive.”

Ashish Goel, CEO, Urban Ladder

“Introduction of GST will be a huge step by the government in backing it’s promise of ease of doing business. As a consumer e-commerce brand, our focus is on building a seamless supply chain and logistics network that helps us fulfil customer orders in different parts of the country.

GST will help create a single unified market across India and allow free movement and supply of goods in every part of the country. Additionally, it will also eliminate the cascading effect of taxes on customers which will bring efficiency in product costs. Overall, GST is going to be a game changer for most industries and especially for e-commerce.”

Abhijeet Bhandari, Co-founder and CEO, GREX

“GST will not only simplify tax structure and compliance for startups but also open a host of opportunities for startups to build enabling technology solutions in the new paradigm.

It will also enable companies with free movement of goods without dual taxation and delay as interstate supply becomes tax-neutral.”

Hari Menon, CEO, BigBasket

‘The passage of the Goods and Services Tax (GST) Bill in the Rajya Sabha is a progressive reform, and we welcome it. If implemented correctly, it will bring relief from one of the key issues faced in the e-commerce segment – cascading taxes.

We are hopeful that in the long-run the creation of a unified marketplace will reduce the tax burden, inventory cost and logistical issues; and ensure seamless movement of goods across the country. This will help bring efficiency, transparency and boost profitability and growth of the sector.”

K Ganesh, Serial Entrepreneur

“The passage of the Goods and Services Tax (GST) Bill in the Rajya Sabha is a progressive measure as it can facilitate seamless movement of goods across inter-state borders enabling better efficiency and spurring growth of the (eCommerce) sector. However, like every regulation, it needs to be implemented correctly, and should not make lives of eCommerce players even more complicated by burdening them with more administrative hassles”

K Ganesh is partner at GrowthStory and Promoter of sector leaders such as BigBasket, Bluestone, FreshMenu, Housejoy, Homelane, Portea etc.

“For the consumer, the price points of many products should come down or remain at the current levels (depending on the GST rates) as there will be free flow of credits since the total indirect tax cost embedded in the price (of products) is likely to decrease”.

Sameer Parwani, Founder & CEO, CouponDunia

“It is very encouraging to note that after a long wait the GST bill has been passed which will help bring clarity and transparency in the online business space. It will open new avenues for the e-commerce players to sell goods and services across states in India.

It would be interesting times ahead with considerable changes and we look forward to see how the Government’s resolve to put in place a significant structural change will benefit all industries The ideal GST rates should be along the lines of existing tax structures so that it doesn’t hurt small businesses specifically.”

Shashank Dixit, CEO, Deskera

“The GST is basically a complete overhaul of the existing tax system. Enterprises will have to start preparing for it. The transition may be difficult for some companies.

But as far as accounting is concerned we are there to help businesses with the technology to embrace GSTand make the transition as painlessly as possible.”

Mr. Dhiraj Agarwal, Co-Founder, Campus Sutra

“From the point of e-commerce there are two points in which we are awaiting clarity. First being mechanics of GST across each state as online orders are not location dependent.

Secondly, as a fashion e- commerce player we are eagerly waiting to see whether apparel continues to be in the necessity category and hence attracts a lower GST than the standard rate”

Palem Srikanth Reddy – Founder & Chairman, LatestOne.com

“GST is a politico-economic milestone in the Revenue administration of India. It is a not just a step, but a leap forward. However, execution to deliver the benefits envisaged in the initiative remain a challenge, given the amount of time to implement (April’2017). As for e-commerce, particularly e-tailers this is a positive development because the market places are able to knock off various tax components in the complex combination of services they provide through multiple legal entities, against each other.

But the inventory based e-tailers were at a huge disadvantage because the service tax component in particular was adding up at every step in form of expense with no means to recover from the customer. This will reduce the overall cost structure of e-tailers by about 5% and make several businesses viable which were earlier struggling to break even. This could be a turning point for several e-tailers and a welcome move !”

Curious, Keen Observant & Dynamic! Chinmay finds peace in meeting people who work hard for humanity. He has new found interest in Gadgets and Techs and at Techstory he gets to write about it! Reach out at- chinmay@techstory.in